Wednesday, October 01, 2008

Bailout and Philippines Real Estate Boom

The mortgage-related problems causing the present US financial crisis can provide a few lessons for the Philippines, which is still in the midst of a real estate boom.

In fact, housing sales in the country starting heating up about the same time as the US real estate boom, and to this day is still one of the world's hottest markets.

The big difference between the Philippines and real estate in the United States and Japan, which also suffered from an earlier industry meltdown, is that homes and even many larger real estate purchases are most often purchased with cash.

Banks and other lending institutions are much less involved in this market. Many homes, in fact, are not only payed in full but often in advance even before the building project has started.

Therefore, unlike and Japan and the US were a real estate bust also greatly impacted the financial industry, there is much less of the same type of exposure in the Philippines.

However, lately there has in a significant increase in the number of people buying homes and other real estate simply for investment purposes. These investors are more inclined to dump their property at any sign of a housing slowdown that would depress prices.

The government could take measures to control such possibilities by limiting speculation in the real estate market.